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Monthly Strategy Update: Emerging Markets Equity with ESG exclusion

Links to the other Candoris Monthlies:

DSM US, Global, EME Growth         SIM US High Yield        Coho ESG US LC        PAM Senior Loans        VanEck EMD

 

Good morning,

The VanEck EME strategy is having a very good start so far in 2019, with an YTD outperformance of 9.11% (VanEck EME +20.88% vs MSCI EM IMI +11.77%, as of 30-4-2019 and gross of fees in USD).

In April the VanEck EME strategy outperformed the benchmark by 2.9% (VanEck EME +4.8% vs MSCI EM IMI +1.9%, gross of fees in USD).

The funds large outperformance during the first part of 2019 was encouraging but not very surprising. As we mentioned throughout 2018, and in previous market downturns, short-term underperformance tends to be driven by technical factors, more specifically a deterioration in growth and size factors as investors seek refuge in safer names during times of market stress, rather than significant deterioration in company fundamentals. We have learned over the years that, as risks dissipate, markets tend to come back to fundamentals. Growth have staged a comeback in 2019 and outperformed value. Small caps, on the other hand, continued to underperform large caps (see graph below). The VanEck EME strategy is more all cap compared to most all cap peers, who have very little exposure to mid and small cap (often due to AUM). 



EME outlook presentation. 




 




 

Information



- Presentation VanEck EME

- VanEck EME versus peers

- EME outlook presentation. 

- Factsheet

- Commentary

- Kiid's

-
EME outlook presentation


Since inception in 2006 the strategy has an annualized outperformance of 2.32%.
The VanEck EME Growth strategy is an all cap strategy, please see below allocation to small/mid and large cap over time. 

 

 

Outlook

We see the outlook as being constructive. We do think that, although some kind of a deal will be reached between China and the U.S. over trade, the more worrying thing is the gravitation towards bilateralism and the continuing attrition that is going to take place between the two “empires.” A turnaround in China due to stimulus can be positive for Asia and emerging markets in general. Earnings in China have not been nearly as bad as they were last year, but in an environment where liquidity is made available, earnings revisions tend to follow rather than presage it. Loose monetary policy talk has sparked fears regarding global growth and an inverted yield curve in the U.S. This does not necessarily preclude emerging markets’ outperformance, in our opinion, but it certainly remains something to watch. One thing seems to be evident, the case for a strong U.S. dollar in 2019 continues to weaken.

Please click here for the complete Q1 performance review

 

 

Since inception in 2006 the VanEck EME has had a higher upside market capture leading to an annualized outperformance of 2.32%

 

 

 

VanEck Emerging Market Equity Composite data                     VanEck EM Equity Fund Facts

Alpha

1.95

 

 

 

ISIN

IE00BYXQSM04

Beta

1.08

 

 

 

Benchmark

MSCI EM IMI

Std Dev

24.38

 

 

 

Bloombergticker

VEMKUI2

UMC

110.23

 

 

 

Currency

USD

DMC

101.55

 

 

 

Asset Class

Equity

Information Ratio

0.28

 

 

 

Region

Emerging Markets

Tracking Error

6.95

 

 

 

Dividend policy

Accumulating

Sharpe Ratio

0.28

 

 

 

 

 

 

Active Share

86.65%

as of 31-12-2018

 

 

 

 

Data as of 30-4-2019 source eVestment

 

Strategy overview – key features of the fund

Investment Philosophy

VanEck believes in structural growth at a reasonable price, as High growth is frequently overvalued and value stocks often remain cheap.
 

Structural growth
Structural trends in company, sector, and country fundamentals:

  • Persistent, visible, and self-sustaining growth
  • Structural growth can be stock-specific or thematic, and can be driven by sustainable advantage, which is often company management
  • Deemphasizes cyclicality, opportunism, and inefficiency

Growth at a reasonable price (GARP)
The intersection of growth and value investing:

  • Avoids overpaying for obvious expressions of growth where valuations can be elevated, driven by opportunistic foreign investors and momentum driven domestic investors.
  • Avoids value traps that may be found in state-owned companies where significant obstacles inhibit the realization of value in emerging markets due to ownership constraints

Investment Process



Please
click here for a more detailed presentation about the Emerging Markets Equity strategy.

 

 

The VanEck Emerging Markets Equity Strategy identifies companies with a structural growth at a reasonable price (“S GARP”). Persistent long-term structural growth opportunities exist in emerging markets. These opportunities are poorly captured by widely used benchmark indices. High growth is frequently overvalued and value stocks often remain cheap. Therefore, we believe achieving strong returns in emerging markets requires an experienced team using a disciplined approach to uncover structural growth at a reasonable price.

 

Links to updated presentation and other documentation

Click to receive the information

- Presentation VanEck Emerging Markets Equity
- VanEck Emerging Markets Equity versus peers
- Factsheet
- Commentary
- Kiid's